Apple sued over iTunes pricing and “fraudulent” gift cards

A couple is suing Apple because some songs purchased on the iTunes Store after …

An Illinois couple has filed a class action suit against Apple for selling "fraudulent" iTunes gift cards. At issue is the language printed on some cards that reads, "Songs are 99�," and as we all all know, a variety of tracks on the iTunes Store are now sold for $1.29.

The couple alleges that such language constitutes deception and fraud on Apple's part, and that the gift cards end up being "worth less than what was represented" because some songs after April 7 of this year cost more than the 99� price. "At all pertinent times, in conjunction with the sale of iTunes gift cards, Defendant knowingly and fraudulently misrepresented, concealed, omitted, and/or suppressed the cost to purchase individual songs from its iTunes internet website," according to allegations filed in the Southern District Court of Illinois.

The pair seeks class action status for the suit, and asks for damages amounting to 30� per song purchased at $1.29 using an iTunes gift card containing the "fraudulent" phrase, as well as the all important punitive damages and attorneys' fees.

On the face of it, the two have a small point to make; not all songs on the iTunes store cost 99� anymore. Apple probably did not or could not recall every gift card ever distributed with the offending language—the couple noted that the gift cards offered as evidence were purchased at Walmart and Sam's Club, so who knows how long they have been in inventory. I checked a gift card I still have that was printed in 2008, and it makes no mention of individual pricing whatsoever.

Beyond that, however, the complaint ignores a number of relevant facts. It's important to note that the face value of the card is credited to the redeemer's account when the code on a gift card is entered at the iTunes Store. The fine print on the cards in question clearly state, "Download $XX worth of entertainment to enjoy on your Mac or Windows PC. And, of course, your iPod." Apple certainly keeps that promise.

Further, it should be noted that before Apple offered multiple pricing tiers for music tracks, those same gift card users could in fact get tracks substantially below 99� by buying an album, which are often (though not always) priced below the cost of buying all the tracks individually. Also before the pricing change, Apple originally offered iTunes Plus tracks for $1.29, though the price later went down to 99�.

Finally, even though a large number of tracks now cost $1.29—keep in mind, this came at the behest of record labels—the iTunes Store still offers millions of songs at 99� as well as a number of songs for just 69�. One could even argue that the files now have added value since all tracks are now sold without DRM. Perhaps the couple would think it would be fair then for Apple to be given back the amount of money it "lost" on tracks purchased with gift cards that should have cost 99�?

We here in Orbiting HQ feel like this suit borders on frivolous, and hope the lawsuit ends up being dismissed. Furthermore, we hope the couple that filed the case is punished by being forced to shop at Walmart and Sam's Club.

Further Reading:

Those with PACER access can read the full complaint by searching for case number 3:09-cv-00479-WDS-DGW, Owens et al v. Apple, Inc.

http://store.apple.com/ca/product/M9949C/A - Apple's website still has the wording, it seems "$15 worth of songs at 99c each from the iTunes store". It vaguely gives you an idea of what you should expect to get.

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and asks for damages amounting to 30¢ per song purchased with an iTunes gift card containing the "fraudulent" phrase

It might be worth noting they're claiming damages on the tracks they purchased for $1.29, not just any song.

Originally posted by robrob:http://store.apple.com/ca/product/M9949C/A - Apple's website still has the wording, it seems "$15 worth of songs at 99c each from the iTunes store". It vaguely gives you an idea of what you should expect to get.

I note that that card is from the Canadian store, and I don't know how pricing differs there (if at all)—in the US store, the page for iTunes gift cards makes no mention of specific pricing for anything other than the face value of the gift amount.

But, you can still buy "millions" of songs for 99¢, just like it says in the fine print on the linked page. Nowhere does it say that all songs are 99¢. It's picking nits, but that's what this couple is doing.

quote:

quote:

and asks for damages amounting to 30¢ per song purchased with an iTunes gift card containing the "fraudulent" phrase

It might be worth noting they're claiming damages on the tracks they purchased for $1.29, not just any song.

Yes, I'll clarify that in the text. But like I mentioned (and so has at least one commenter), would they feel it's fair to pay Apple extra for songs that cost less than 99¢, so that each and every song purchased equals 99¢? I honestly believe that would work in Apple's favor in the long run.

Can anybody provide me with the title of a song that's 69 cents? I use the iTunes store a lot and I've only seen some (frankly ridiculous) tracks priced at $1.29. Correct me if I'm wrong, but the $1.29 price point was intended for "hot releases" and new songs, not the Greatest Hits of Stevie Nicks.

They CAN get songs for $0.99, just not every song in the store. The fact that the card mentions the price at all undercuts the suit IMO. The card doesn't promise so many songs, but so many songs at $0.99.

It reminds me of the old Starbucks coupons which promised a free beverage, but defined that as any drink under $2.99 (IIRC). You could use the coupon for a free drink or for $2.99 towards the purchase of a more expensive drink. At other times the free coupons could be used for any drink the store offered, but the fine print makes it clear which kind of coupon you have.

I would also point out that even before not every song in the store was $0.99 since a lot of songs were only available with the purchase of an album.

Originally posted by Uncouth Youth:Can anybody provide me with the title of a song that's 69 cents? I use the iTunes store a lot and I've only seen some (frankly ridiculous) tracks priced at $1.29. Correct me if I'm wrong, but the $1.29 price point was intended for "hot releases" and new songs, not the Greatest Hits of Stevie Nicks.

I am not a huge fan of lawsuits, and I am a huge fan of Apple. But I wouldn't be so quick to say the person filing is in the wrong. Is it worth their time? Maybe they have lots of time... is it worth my time or most people's time? Probably not. Depending on the exact wording on the back of the card, they may have a point.

However, in principle I don't like stuff like this... because it would be such a huge waste of time, money, and plastic to recall and destroy a bunch of gift cards because the per song pricing changed.

Most likely they are probably just bitter about the $1.29 pricing... because it now seems that any song that is in anyway popular is automatically $1.29. I know personally I am now more reluctant to buy music, because I felt $0.99 was a good value and I feel ripped off at $1.29.

The only way I could see them having a case is if *current* gift cards (that is, ones printed after the pricing changes) still make the claim that "songs are $0.99" (which clearly implies that ALL songs are $0.99).

If they're talking about an older card, good luck trying to argue that one. If the language on the card was accurate at the time it was printed, I don't see how Apple could be at fault. What are they supposed to do, go back in time and change the language on the card before it became inaccurate in the future?

Full Disclosure: In my prior life I was an attorney. Although my practice did not include Class Action Litigation, 2 of my partners were active in the field. Although they never undertook a frivolous action, we saw many. In many of those cases the litigants were recruited and in almost all of the cases the law firm represented the plaintiffs on contingency. Both are violations of Bar Ethics.

I have long advocated the debarment of those attorneys and the enforcement of rules of procedures that prohibit the filing of frivolous complaints and motions intended to delay the proceedings. In Federal Courts [and I believe in most state and local jurisdictions] when attorneys sign a pleading, by their signature they certify that the pleading is not frivolous or interposed for the purpose of delay. Severe penalties are provided for but the rules are rarely enforced.

Although I find lawsuits of this nature troubling, I also have to wonder if the plaintiffs have a case.

Good business practice would have been for Apple to list the range of prices on the car, since they've always had variables in their pricing. Or better yet, don't mention the price at all. Best of all, however, would have been a statement clarifying that most tracks were 99¢ but not all. That would have been the optimal CYA statement.

To me, it comes down to whether or not the card itself is a form of advertising. If so, perhaps they have a (technical, scummy) case against misleading advertising.

Wouldn't this be similar to say, buying a GPS device whose box claims "free map updates!" only to discover that it only includes free updates for California, Idaho and Maine, and that the rest of the states require a fee to be updated?

Songs on the iTMS were $1.29 prior to April anyway. They were (and probably still are) referred to as iTunes Plus. They are higher quality than their 99¢ counter parts.

There are currently plenty of songs titles available for 99¢.

Additionally - if these folks bought the gift cards at an Apple Store - that's one thing.

But seeing as how they bought them at Wal-Mart and SAMs Club - they get what they pay for. Wal-Mart/ SAMs have a tendency to have out-dated and old stocks still on the shelves months after something it time-limited or dated.

This is not the fault of Apple because Wal-Mart can't move a product fast enough to clear way for new - current - updated products.

These folks bringing the lawsuit are idiots looking for their 15 minutes of fame - nothing more.

Originally posted by darkowl:Yes, you get $15 worth of songs if you buy ~15 songs at 99c (with a few c left over).

What's the big deal? Not all songs are $1.29, so why can't they just buy the 99c ones?

America, land of the free, home of the litigious.

Not really. You can't spend all of that $15 in the first place. Even if they bought 15 songs at $.99 with a $15 gift card, Apple would still have 15 cents to hold on to. Since tunes are always priced at $.69, $.99 and $1.29, there is no way that buying a card with a face value equal to a multiple of 5 or 10 will ever be fully redeemed. So, for every card sold, Apple knows that they will keep at least a penny on every dollar spent on a gift card, because it is not mathematically possible to spend the full face amount of the gift card.

Here's a little known secret about gift cards: a significant number of cards are never fully redeemed or are redeemed at all. That's why merchants love to sell gift cards, because unless buyers are extremely penny conscious, the full value of gift cards are more often than not never fully used, and the merchant ends up with a little bit still in their bank accounts. It's like giving the merchants "free money", and they know it.

It's like that scam they tried to pull in "Office Space". Instead of skimming fractions of pennies per transaction, merchants often accumulate whole pennies or a significant portion of the full face value of cards. It's money in the bank, with no product going out.

The only way that you can get full face value out of a $15 gift card is to do this:

Buy 15 songs at $.99 each. There's $.15 left over. Then, recharge the card with exactly $14.70 and buy another 15 songs. But, how many people would go through the trouble?

Not really. You can't spend all of that $15 in the first place. Even if they bought 15 songs at $.99 with a $15 gift card, Apple would still have 15 cents to hold on to. Since tunes are always priced at $.69, $.99 and $1.29, there is no way that buying a card with a face value equal to a multiple of 5 or 10 will ever be fully redeemed. So, for every card sold, Apple knows that they will keep at least a penny on every dollar spent on a gift card, because it is not mathematically possible to spend the full face amount of the gift card.

Here's a little known secret about gift cards: a significant number of cards are never fully redeemed or are redeemed at all. That's why merchants love to sell gift cards, because unless buyers are extremely penny conscious, the full value of gift cards are more often than not never fully used, and the merchant ends up with a little bit still in their bank accounts. It's like giving the merchants "free money", and they know it.

It's like that scam they tried to pull in "Office Space". Instead of skimming fractions of pennies per transaction, merchants often accumulate whole pennies or a significant portion of the full face value of cards. It's money in the bank, with no product going out.

The only way that you can get full face value out of a $15 gift card is to do this:

Buy 15 songs at $.99 each. There's $.15 left over. Then, recharge the card with exactly $14.70 and buy another 15 songs. But, how many people would go through the trouble?

This comment was edited by GwT on July 05, 2009 16:08

Yea but the money you don't spend doesn't go back to Apple, it's on your account until you add more, so if you recieve a lot of gift cards, you don't lose a lot of money, and besides, that money doesn't go back to apple...and if you buy a $100 gift card, you can get the exact value of the card (that is, of course if you're buying 99cent cards...and also, what darkowl was saying is that you will still get about $15 worth of songs...